Drop term life insurance when nearing FIRE?

[Downtown]

Just got annual bill for term life insurance policy (if I die, DW is beneficiary). DW and I are nearing FIRE...hopefully in the next 2-4 yrs. My question is when, or if, to drop term life insurance since we already enough $ for DW to live a very comfortable lifestyle without me around. I think there's about 10 years left on the policy. House will be paid off in 2016, and college funds are already set aside. What did you do? Did you use the annual premium funds for other purposes, or keep the policy funded...just in case? Thanks for your wisdom in advance!

Downtown


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[2017ish]

We dropped as soon as we had sufficient assets to get the kids through college and to prevent surviving spouse (if any) from being unduly pinched. I think the kids were in high school at the time. Funds just went into savings after that.

In your situation, it sounds like you can drop it--assuming sufficient assets in place to pay off house and still leave DW in good position. You don't really have a monetary risk that you are insuring against.

 

[ejman]

We dropped it as soon as we reached FI. For me, the purpose of life insurance was to provide for my wife and kids as my paycheck would disappear in the event of my going to greener pastures. As soon as a reasonable draw from our liquid NW was sufficient to replace my paycheck I saw no need to continue life insurance premium payments.

 

[Dash man]

We keep some term insurance with the kids as beneficiaries just to help them out until the second of us is gone. It's 20 year term and will eventually get too expensive, but for now we're keeping it.


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[samclem]

Generally, it's okay to drop the term insurance when you've got enough saved so that the surviving spouse won't have a financial hardship. The insurance has done its art at that point. But be sure you're really there--that any reduction in SS, pensions, medical insurance, etc won't lave the survivor in a financially tough spot.

As far as where to put the premium dollars saved--it was an expense, now it is gone. Do whatever you want with it. Maybe buy a pizza and beer every month with the money to celebrate your continued survival!

 

[bingybear]

We dropped our insurance about when we had planned early in life. We used a term policy to protect our family if one or the other of us died while raising kids. We pulled the plug actually when we FIREd at about 54 with kids grown and out of school. Note when we started talking about RE when we just turned 53, we were talking RE @58. A few months in and we chose to RE near or 54th birthdays. ... kind of an anti-OMY 4 times over.

The real question is what are you insuring against? You said DW would be covered if you passed, but would you be covered if she passed first?

The whole idea of term insurance is to cover a risk while you can't afford it. If you've got enough to cover the risk, then you don't need the insurance. However, if you like the feeling of having the insurance and you can afford it, you can keep it. Really your choice.

 

[jarts98]

We are keeping our policy for the remaining few years of the original 20 year term. We are FI and the surviving spouse wouldn't "need" the death benefit, but the premium is so low relative to the death benefit, we'll just let it run it's course.

When the low premium period ends, we'll let it lapse.

 

[Meadbh]

As a single, I never paid for life insurance, but I most certainly had disability insurance. Of course, I cancelled that at ER.

 

[RAE]

We dropped it as soon as we reached FI. For me, the purpose of life insurance was to provide for my wife and kids as my paycheck would disappear in the event of my going to greener pastures. As soon as a reasonable draw from our liquid NW was sufficient to replace my paycheck I saw no need to continue life insurance premium payments.

+1. Premium payments just went into savings after that, as someone else said.

 

[VFK57]

We are keeping our policy for the remaining few years of the original 20 year term. We are FI and the surviving spouse wouldn't "need" the death benefit, but the premium is so low relative to the death benefit, we'll just let it run it's course.

When the low premium period ends, we'll let it lapse.

Same here

 

[travelover]

What are you insuring against? That will answer your question.

 

[Willers]

We are keeping our policy for the remaining few years of the original 20 year term. We are FI and the surviving spouse wouldn't "need" the death benefit, but the premium is so low relative to the death benefit, we'll just let it run it's course.

When the low premium period ends, we'll let it lapse.

+1 Same here. No great reason other than the fact that it is still so cheap I'll keep it. It will help her afford the pool boy if I have an early demise.


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[PERSonalTime]

I'm like jart98, keeping the term around until it expires in a few years. DW is still working this year, but kids are independent and out of the house. Premiums are reasonable and within our ER budget. It's nice to have the extra comfort should either one of us do an "early check out." Once the term limit is reached we'll exchange the premiums for a raise in our fun money account.

 

[Independent]

If I'm in good health, I'd drop it. I bought term instead of permanent because I figured I would drop it some day. When my wife can afford our target lifestyle after I die, without the insurance, then the insurance has done its job.

But, if I'm in poor health, I'd think about keeping it to the end of the level premium period. I'm just gambling at that point (not insuring), but the odds may be in my favor and I might be willing to bet the premium at favorable odds.

 

[rodi]

As a single, I never paid for life insurance, but I most certainly had disability insurance. Of course, I cancelled that at ER.

This was me prior to marriage/kids. When I bought my second house the mortgage company must have sold my name to insurance companies... I kept getting hard sales calls - asking didn't I want to make sure my house wasn't lost if I died. I'd laugh and say I didn't care- I'd be dead... and my cat was cute enough to find a new home. (My parents would have taken the cat... but that's not as funny.).

It changed when I had kids - DH and I figured either would be ok on their own income if there were no mortgage - so we took out policies equal to our mortgage... when we paid off the mortgage, we let it lapse.

 

[bingybear]

This was me prior to marriage/kids. When I bought my second house the mortgage company must have sold my name to insurance companies... I kept getting hard sales calls - asking didn't I want to make sure my house wasn't lost if I died. I'd laugh and say I didn't care- I'd be dead... and my cat was cute enough to find a new home. (My parents would have taken the cat... but that's not as funny.).

Possible, but maybe not. Buying a new house is public record. Many use public records to get sales leads. They also get names from probate court. Along with legit companies can be scammers.

 

[MichaelB]

Generally, it's okay to drop the term insurance when you've got enough saved so that the surviving spouse won't have a financial hardship. The insurance has done its art at that point. But be sure you're really there--that any reduction in SS, pensions, medical insurance, etc won't lave the survivor in a financially tough spot.

+1

It's insurance, done its job, no longer needed. Time to use that money for something more productive. Besides, it's a good thing to be worth more alive than dead. No need to give anyone unnecessary motivations.

 

[Loving Life]

I kept mind, it was one of the conditions for me to Retire Early even though we have been FI for a decade. When I went back to work over seas, She had me raise it again. I know that its not needed, but happy wife is all that is needed.

 

[REWahoo]

I kept mind, it was one of the conditions for me to Retire Early even though we have been FI for a decade. When I went back to work over seas, She had me raise it again. I know that its not needed, but happy wife is all that is needed.

Sleep with one eye open...

 

[txtig]

I had a 15 year term policy that expired a couple of years ago at age 61. I did not renew due to the big increase in cost. Still have a term policy through work ( 2 years pay), but that will go away in six months when I finally retire for good. We are FI, so really don't need the protection any more.

 

[sayhey24]

We are keeping our policy for the remaining few years of the original 20 year term. We are FI and the surviving spouse wouldn't "need" the death benefit, but the premium is so low relative to the death benefit, we'll just let it run it's course.

When the low premium period ends, we'll let it lapse.

+1
We are in a similar situation, the monthly cost is only $24

 

[RE2Boys]

I'm in the last four years of a 20 year level term policy. It has largely done its job as it was to help my wife raise the boys in my absence, and corresponding cut in pension by half. But I've decided to keep it as I still must get the boys through college, and as with most level terms, its a relative bargain now for a 66 year old. If the boys were on their own, the term policy would have been gone.

 

[Senator]

I have never really had dependents, so I never had life insurance other than what work provides, for free.

Get rid of it as soon as you can. You do not want to be worth more dead than alive anyway.

 

[hesperus]

I am right in the middle of the process of converting the only life insurance policy we have to a reduced paid up policy. I don't want to take the tax hit in one year, so converting it to a RPU eliminates the premium, keeps the policy intact for as long as I want, and also still keeps the funds in the market. We reached a point a while back where a life insurance policy just isn't necessary for us, in that DW would have plenty of immediate funds available if I were to go. With a RPU, I'm going to take small portions out over the next 5 years, and in the meantime the funds (approx 90K cash out value) will still be in the market.

 

[karen1972]

As a single, I never paid for life insurance, but I most certainly had disability insurance. Of course, I cancelled that at ER.

+1 though someone was always trying to sell me one.